Market Resilience

Jon Danielsson; Efstathios Panayi; Gareth Peters; Jean-Pierre Zigrand

doi:10.2139/ssrn.3169755

Market Resilience

Jon Danielsson, Efstathios Panayi, Gareth Peters, Jean-Pierre Zigrand

Research output: Working paper

Abstract

We propose a method to capture the notion of resilience, the dynamic aspect of liquidity in the limit order book, through the Threshold Exceedance Duration (TED) metric that we introduce. This measures the duration of liquidity 'droughts.' We illustrate the explanatory power of a survival regression framework for the duration of ‘droughts' in terms of observable state variables reflecting the shape and evolution of the limit order book using Chi-X data. Finally, we introduce a method to summarise exceedance duration information across different thresholds, called Liquidity Resilience Profile, which enables the comparison and the ranking of liquidity resilience.

Original language	English
Publisher	SSRN
Number of pages	51
DOIs	https://doi.org/10.2139/ssrn.3169755
Publication status	Published - 11 May 2018

Keywords

C41
C57
D44
G12
G14
Limit Order Book
Liquidity Measures
Liquidity Provision
Optimal Trade Execution
Resilience

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http://www.mendeley.com/research/market-resilience

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title = "Market Resilience",

abstract = "We propose a method to capture the notion of resilience, the dynamic aspect of liquidity in the limit order book, through the Threshold Exceedance Duration (TED) metric that we introduce. This measures the duration of liquidity 'droughts.' We illustrate the explanatory power of a survival regression framework for the duration of {\textquoteleft}droughts' in terms of observable state variables reflecting the shape and evolution of the limit order book using Chi-X data. Finally, we introduce a method to summarise exceedance duration information across different thresholds, called Liquidity Resilience Profile, which enables the comparison and the ranking of liquidity resilience. ",

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AU - Panayi, Efstathios

AU - Peters, Gareth

AU - Zigrand, Jean-Pierre

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N2 - We propose a method to capture the notion of resilience, the dynamic aspect of liquidity in the limit order book, through the Threshold Exceedance Duration (TED) metric that we introduce. This measures the duration of liquidity 'droughts.' We illustrate the explanatory power of a survival regression framework for the duration of ‘droughts' in terms of observable state variables reflecting the shape and evolution of the limit order book using Chi-X data. Finally, we introduce a method to summarise exceedance duration information across different thresholds, called Liquidity Resilience Profile, which enables the comparison and the ranking of liquidity resilience.

AB - We propose a method to capture the notion of resilience, the dynamic aspect of liquidity in the limit order book, through the Threshold Exceedance Duration (TED) metric that we introduce. This measures the duration of liquidity 'droughts.' We illustrate the explanatory power of a survival regression framework for the duration of ‘droughts' in terms of observable state variables reflecting the shape and evolution of the limit order book using Chi-X data. Finally, we introduce a method to summarise exceedance duration information across different thresholds, called Liquidity Resilience Profile, which enables the comparison and the ranking of liquidity resilience.

KW - C41

KW - C57

KW - D44

KW - G12

KW - G14

KW - Limit Order Book

KW - Liquidity Measures

KW - Liquidity Provision

KW - Optimal Trade Execution

KW - Resilience

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DO - 10.2139/ssrn.3169755

M3 - Working paper

BT - Market Resilience

PB - SSRN

ER -

Market Resilience

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Keywords

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